TREASURIES-U.S. yields fall as Fed's Powell affirms slow rate hike pace starting December

(Recasts, adds Fed's Powell's remarks, fund manager comments, bullets, updates prices) * Fed's Powell warns inflation fight is not over * Fed's peak fed funds rate slips to 4.9% after Powell's remarks * U.S. Q3 GDP 2nd estimate revised higher to 2.9% * ADP private sector jobs for November rise less than expected By Gertrude Chavez-Dreyfuss NEW YORK, Nov 30 (Reuters) - U.S. Treasury yields retreated across the board on Wednesday after trading higher for most of the session after Federal Reserve Chair Jerome Powell struck a more dovish tone than the market expected, saying the U.S. central bank could slow the pace of rate hikes as soon as next month. Fed funds futures on Wednesday raised the chances of a 50 basis-point hike at a policy meeting next month to 89% from 83% just before Powell's comments. For the February meeting, the rates market has factored in a 58% likelihood of another such rate hike. The peak Fed funds rate slid after Powell's comments to 4.95%, seen hitting in May next year. Before his remarks, that peak rate was at 5.05%, expected at the June meeting. Powell said on Wednesday the U.S. central bank could ease the pace of interest rate hikes "as soon as December" but warned that the fight against inflation is far from over. "Generally, the market seems to have priced in the worst of it already and just sort of getting the event volatility out of play is sort of helping risk assets," said John Luke Tyner, fixed income portfolio manager at Aptus Capital Advisors in Fairhope, Alabama. "This probably isn't the response that Powell is looking for, especially since the terminal rate is moving lower. If this was the message that Powell is trying to communicate, then this is different from what he said in the last several meetings," he added. In afternoon trading, the yield on 10-year Treasury notes fell 5.2 basis points to 3.697%. The yield on the 30-year Treasury bond slipped 1.3 bps to 3.792%. A widely tracked part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes remained inverted at -72.7 bps, narrower following the slew of data released earlier in the session. The inversion of this curve typically precedes recession. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 4.3 bps at 4.297%. U.S. yields earlier rose after data showed the world's largest economy grew more than expected in the third quarter, reinforcing expectations that the Fed will continue to raise interest rates well into next year, though at a slightly slower pace. Gross domestic product expanded at a 2.9% annualized rate in the third quarter, according to the government's second estimate, higher than the preliminary number of 2.6%. The economy had contracted at a 0.6% rate in the second quarter. The second estimate was also higher than economists' forecast of 2.7%, a Reuters poll showed. The report followed U.S. private sector employment data, which showed new jobs created rose less than expected in November, giving the Fed some flexibility to ease the pace of tightening. U.S. private employment increased by 127,000 jobs in November, the ADP National Employment report showed. Economists polled by Reuters had forecast private jobs increasing 200,000. The ADP number briefly earlier weighed on U.S. Treasury yields. November 30 Wednesday 2:36PM New York / 1936 GMT Price Current Net Yield % Change (bps) Three-month bills 4.265 4.3714 -0.013 Six-month bills 4.5425 4.7138 -0.018 Two-year note 100-34/256 4.4297 -0.043 Three-year note 100-220/256 4.1872 -0.057 Five-year note 100-8/256 3.868 -0.054 Seven-year note 100-120/256 3.7981 -0.051 10-year note 103-104/256 3.7124 -0.036 20-year bond 99-232/256 4.0067 -0.008 30-year bond 103-84/256 3.8126 0.011 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 31.00 -0.25 spread U.S. 3-year dollar swap 11.50 -0.50 spread U.S. 5-year dollar swap 3.50 0.00 spread U.S. 10-year dollar swap -4.25 0.25 spread U.S. 30-year dollar swap -44.50 0.50 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski and Lisa Shumaker)